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Oracle 'Wins' Sun in Ricochet Romance

The companies owe it to their shareholders, customers, and employees to state their plans and positions as quickly and clearly as possible

That is an issue that made the reported interest of IBM in Sun so intriguing. IBM has long demonstrated the ability to manage multiple business models simultaneously and possesses a long string of successful acquisitions used to supercharge a host of its own offerings. The company also has the breadth and depth of management skills across hardware, software, and services to have worked effectively across all of Sun's product and service organizations. The picture with Oracle is a good deal less clear, largely because the company has been extremely successful with just one software-centric business model. This is not a bad thing -- no one castigates Wal-Mart. However, Sun's systems-focused business model is likely to leave Oracle guessing in areas where success depends on clarity.

Numerous acquisitions aside, Oracle has not demonstrated that it can manage a second business model and is not likely to have the skill sets necessary to evaluate which of Sun's businesses should be saved, sold, or abandoned. Some have suggested that Oracle can rely on Sun's existing management team and board members to help, but if they were truly able why did they miss the opportunity to turn around the company? Going outside to bring in turnaround managers is a tricky business, particularly when you are dealing with a workforce that needs to hear some good news in the very worst way.

IT acquisitions tend to fail more often for cultural than technological reasons -- witness HP and Compaq, among others. Some Oracle/Sun boosters have suggested that the companies' cultural similarities -- citing their West Coast heritage and long-time collaboration as examples -- certainly outweigh Sun hooking up with an East Coast company like IBM. While there is some truth to that point, it ignores the immense gap that typically exists between hardware and software cultures. Under CEO Jonathan Schwartz, Sun has been something of a software vendor in training. One can only hope that Larry Ellison and crew are equipped to provide greater guidance and inspiration.

Overall, the proposed Oracle/Sun deal offers more questions than it does answers. For example, what should be done about Sun's StorageTek business? Can it be sold (and, if so, who would want to buy it), should it be spun off or closed? Speaking of storage, Sun sells LSI Logic-based disk in the midrange and HDS-based disk at the high end. How does that square with Larry Ellison's a long-time investment in Pillar Data? How will an R&D heavy group like the UltraSPARC organization fare under Oracle's cost-conscious managers? And what about MySQL and Oracle's less-than-stellar open-source record?

At the end of the day, enterprise IT customers tend to regard two things above all others: reliability and predictability. Related to this, it can take very little uncertainty for a business to shift allegiance if it feels a trusted vendor has lost its way, and numerous competitors stand to gain when and where Oracle and Sun lose. For that reason, we would urge Oracle and Sun to state their relative plans and positions as quickly and clearly as possible. The companies certainly owe it to their shareholders, customers, and employees. However, if they hope for their proposed deal to succeed, they also owe it to themselves.